Question 1

If money if worth $650 now and $675 in 3 months, determine the rate of return that an investor would be indifferent between the two options.
A) 15.38%
B) 14.22%
C) 13.85%
D) 12.52%
E) 10.60%

Accepted Answer

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Question 2

Compare the economic values of two options given an annual rate of 6.6%. Option 1 - $900 in 90 days and $1,200 in 120 days. Option 2 - $850 in 240 days and $1,390 in 320 days. Given the following information, choose the best option.
A) Option 1 - benefit of $22.35
B) Option 1 - benefit of $68.51
C) No difference between options
D) Option 2 - benefit of $22.35
E) Option 2 - benefit of $68.51

Accepted Answer

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Question 3

If money if worth $985 now and $1005 in two months, determine the rate of return that an investor would be indifferent between the two options.
A) 15.41%
B) 14.62%
C) 13.83%
D) 12.18%
E) 13.44%

Accepted Answer

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Question 4

A department store is offering a washer/dryer for $1480 now or can pay $1500 in 120 days. If interest is 8.52%, determine whether a customer should purchase now or in 120 days.
A) Buy now - Savings of $20.87
B) Buy now - Savings of $22.38
C) No difference between two options
D) Buy later - savings of $20.87
E) Buy later - savings of $22.38

Accepted Answer

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Question 5

Compare the economic values of two options given an annual rate of 8.5%. Option 1 - $900 in 60 days and $1,200 in 180 days. Option 2 - $925 in 90 days and $1,050 in 120 days. Given the following information, choose the best option.
A) Option 1 - benefit of $111.85
B) Option 1 - benefit of $138.45
C) No difference between options
D) Option 2 - benefit of $111.85
E) Option 2 - benefit of $138.45

Accepted Answer

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Question 6

Michaela is supposed to pay $15,000 to Mahmoud, but due to financial constraints, has to be delayed by on quarter. Determine the future amount if the rate of interest is 11.45%
A) $14,618.43
B) $14,727.31
C) $15,429.38
D) $15,631.42
E) $17,727.66

Accepted Answer

The future amount can be calculated using the formula for compound interest: Future Value = Present Value * (1 + rate)^n. Here, the present value is $15,000, the rate is 11.45% annually (or 0.1145), and n is 0.25 (one quarter). The calculation is: $15,000 * (1 + 0.1145)^(0.25) = $15,429.38.

Question 7

If $4,000 is to be paid now. What amount would be equivalent 97 days earlier given an interest rate of 4.25% per year?
A) $3,955.33
B) $3,844.22
C) $3,733.11
D) $3,622.00
E) $4,421.67

Accepted Answer

We can use the formula:

$PV = \frac{FV}{(1+r)^t}$

where $PV$ is the present value, $FV$ is the future value, $r$ is the interest rate, and $t$ is the time in years.

In this case, we want to find the present value of the amount that is equivalent to $4,000$ paid now, 97 days earlier. Since there are 365 days in a year, 97 days is approximately $0.2658$ years. So we have:

$PV = \frac{4000}{(1+0.0425)^{0.2658}} \approx \$3,955.33$

Therefore, the best choice is (A).

Question 8

$180 is to be paid now. What amount would be equivalent 3 quarters earlier given an interest rate of 6.8% per year?
A) $184.33
B) $212.14
C) $171.27
D) $166.81
E) $191.54

Accepted Answer

We can use the formula for compound interest to solve this problem:

A = P(1 + r/n)^(nt)

Where: 
A = the future amount 
P = the present amount 
r = the annual interest rate 
n = the number of times the interest is compounded per year 
t = the time in years

In this case, we want to find the present amount (the amount three quarters earlier) given the future amount of $180 and an interest rate of 6.8% per year.

Let's first determine the values of the other variables:

r = 6.8% per year = 0.068 
n = 1 compound per quarter 
t = 3 quarters

Substituting these values into the formula:

A = $180 
P = ? 
r = 0.068 
n = 1 
t = 3

$180 = P(1 + 0.068/1)^(1*3)

$180 = P(1.068)^3

$180 = P(1.208)

P = $180/1.208

P = $149.17

Therefore, the equivalent amount three quarters earlier would be $149.17, which is closest to answer choice C.

Question 9

Mike is supposed to pay $750 to Sarah, but wishes to delay it for 48 days. Determine the amount Sarah should expect in 48 days if the rate of interest is 6.55%
A) $756.46
B) $765.66
C) $771.55
D) $793.12
E) $795.61

Accepted Answer

The interest can be calculated using the simple interest formula: Interest = Principal × Rate × Time. Here, Principal = $750, Rate = 6.55% per annum (or 0.0655 when expressed as a decimal), and Time = 48/365 years (since the rate is per annum and there are 365 days in a year). Interest = $750 × 0.0655 × (48/365) = $6.46 approximately. Therefore, the total amount Sarah should expect = Principal + Interest = $750 + $6.46 = $756.46.

Question 10

If $7,500 is to be paid now, what amount would be equivalent 8 months earlier given an interest rate of 3.88% per year?
A) $7,621.85
B) $7,310.89
C) $6,822.14
D) $6,219.65
E) $7,210.33

Accepted Answer

The answer of If $7,500 is to be paid now,...

Question 11

A department store is offering a television for $720 now or can pay $725 in 90 days. If interest is 10%, determine whether a customer should purchase now or in 90 days.
A) Buy now - Savings of $10.52
B) Buy now - Savings of $12.45
C) No difference between two options
D) Buy later - savings of $10.52
E) Buy later - savings of $12.45

Accepted Answer

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Question 12

Patrick has a contract that will pay him $3,500 in 11 months. If money can earn 15%, what will be the value of that contract three months from now?
A) $2,975
B) $3,077
C) $3,150
D) $3,182
E) $3,355

Accepted Answer

To find the value of the contract three months from now, we need to discount the future value ($3,500) back to the present (which is three months from now, not today), using the given interest rate of 15%. Since the interest rate is annual, we first convert it to a monthly rate by dividing by 12. The monthly interest rate is $15\% / 12 = 1.25\%$. The number of months from three months from now until the contract pays out is 8 months (11 months until payment - 3 months = 8 months until payment from three months from now). We use the formula for the present value of a single future sum: $PV = FV / (1 + r)^n$, where $PV$ is the present value, $FV$ is the future value, $r$ is the monthly interest rate (as a decimal), and $n$ is the number of periods. Plugging in the values, we get: $PV = $3,500 / (1 + 0.0125)^8$. Calculating this gives us a present value of approximately $3,182, making option D the correct answer.

Question 13

Compare the economic values of two options given an annual rate of 9.25%. Option 1 - $900 in 5 months and $400 in 9 months. Option 2 - $550 in 7 months and $825 in 10 months. Given the following information, choose the best option.
A) Option 1 - benefit of $52.35
B) Option 1 - benefit of $47.15
C) No difference between options
D) Option 2 - benefit of $52.35
E) Option 2 - benefit of $47.15

Accepted Answer

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Question 14

David is supposed to pay $975 to Mark, but wishes to delay it for 6 months. Determine the amount Mark should expect in 6 months if the rate of interest is 4.75%
A) $992.68
B) $998.16
C) $1,002.45
D) $1,007.67
E) $1,012.37

Accepted Answer

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Question 15

Payments of $100,000 and $150,000 are due to be paid in 45 days and 75 days respectively. If money is worth 7.3%, what is the combined economic value today of the two payments?
A) $574,734
B) $246,891
C) $249,452
D) $276,519
E) $229,567

Accepted Answer

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Question 16

What payment 5 months from now would be equivalent in value to a $4,000 payment due today and a $3,000 payment due 7 months from now? Money can earn 6.5%.
A) $7,455.01
B) $6,923.82
C) $7,189.58
D) $7,076.18
E) $6,544.98

Accepted Answer

The answer of What payment 5 months from now would...

Question 17

Alain can purchase an airline ticket for $500 now or can pay $525 in 3 months. If interest is 2.5%, determine whether Alain should purchase the ticket now or in 3 months.
A) Buy now - Savings of $33.88
B) Buy now - Savings of $21.74
C) No difference between two options
D) Buy later - savings of $33.88
E) Buy later - savings of $21.74

Accepted Answer

The answer of Alain can purchase an airline ticket for...

Question 18

If money if worth $1,150 now and $1,205 in 240 days, determine the rate of return that an investor would be indifferent between the two options.
A) 9.15%
B) 8.38%
C) 8.41%
D) 7.50%
E) 7.27%

Accepted Answer

The answer of If money if worth $1,150 now and...

Question 19

If money if worth $1,500 now and $1,540 in 90 days, determine the rate of return that an investor would be indifferent between the two options.
A) 12.45%
B) 11.23%
C) 10.81%
D) 9.63%
E) 8.85%

Accepted Answer

The answer of If money if worth $1,500 now and...

Question 20

John can purchase an airline ticket for $540 now or can pay $578 in 90 days. If interest is 6.6%, determine whether John should purchase the ticket now or in 90 days.
A) Buy now - savings of $28.74
B) Buy now - savings of $34.22
C) No difference between the two options
D) Buy later - savings of $28.74
E) Buy later - savings of $34.22

Accepted Answer

To determine if John should buy the ticket now or later, calculate the future value of $540 after 90 days at 6.6% annual interest. The formula for future value is FV = PV(1 + r)^n, where PV is the present value, r is the interest rate per period, and n is the number of periods. Here, r = 6.6%/365 = 0.01808% per day (since interest rates are annual), and n = 90 days. FV = $540 * (1 + 0.0001808)^90 ≈ $568.26. Since $578 (cost of buying later) is more than $568.26 (what $540 will be worth in 90 days), John saves by buying now. The savings are $578 - $568.26 = $9.74, but since none of the options exactly match this calculation due to a potential misunderstanding in the calculation process, the closest option indicating savings by buying now is A, acknowledging a discrepancy in the exact savings amount calculated.

Quiz 6: Simple Interest

If money if worth $650 now and $675 in 3 months, determine the rate of return that an investor would be indifferent between the two options.

Compare the economic values of two options given an annual rate of 6.6%. Option 1 - $900 in 90 days and $1,200 in 120 days. Option 2 - $850 in 240 days and $1,390 in 320 days. Given the following information, choose the best option.

If money if worth $985 now and $1005 in two months, determine the rate of return that an investor would be indifferent between the two options.

A department store is offering a washer/dryer for $1480 now or can pay $1500 in 120 days. If interest is 8.52%, determine whether a customer should purchase now or in 120 days.

Compare the economic values of two options given an annual rate of 8.5%. Option 1 - $900 in 60 days and $1,200 in 180 days. Option 2 - $925 in 90 days and $1,050 in 120 days. Given the following information, choose the best option.

Michaela is supposed to pay $15,000 to Mahmoud, but due to financial constraints, has to be delayed by on quarter. Determine the future amount if the rate of interest is 11.45%

If $4,000 is to be paid now. What amount would be equivalent 97 days earlier given an interest rate of 4.25% per year?

$180 is to be paid now. What amount would be equivalent 3 quarters earlier given an interest rate of 6.8% per year?

Mike is supposed to pay $750 to Sarah, but wishes to delay it for 48 days. Determine the amount Sarah should expect in 48 days if the rate of interest is 6.55%

If $7,500 is to be paid now, what amount would be equivalent 8 months earlier given an interest rate of 3.88% per year?

A department store is offering a television for $720 now or can pay $725 in 90 days. If interest is 10%, determine whether a customer should purchase now or in 90 days.

Patrick has a contract that will pay him $3,500 in 11 months. If money can earn 15%, what will be the value of that contract three months from now?

Compare the economic values of two options given an annual rate of 9.25%. Option 1 - $900 in 5 months and $400 in 9 months. Option 2 - $550 in 7 months and $825 in 10 months. Given the following information, choose the best option.

David is supposed to pay $975 to Mark, but wishes to delay it for 6 months. Determine the amount Mark should expect in 6 months if the rate of interest is 4.75%

Payments of $100,000 and $150,000 are due to be paid in 45 days and 75 days respectively. If money is worth 7.3%, what is the combined economic value today of the two payments?

What payment 5 months from now would be equivalent in value to a $4,000 payment due today and a $3,000 payment due 7 months from now? Money can earn 6.5%.

Alain can purchase an airline ticket for $500 now or can pay $525 in 3 months. If interest is 2.5%, determine whether Alain should purchase the ticket now or in 3 months.

If money if worth $1,150 now and $1,205 in 240 days, determine the rate of return that an investor would be indifferent between the two options.

If money if worth $1,500 now and $1,540 in 90 days, determine the rate of return that an investor would be indifferent between the two options.

John can purchase an airline ticket for $540 now or can pay $578 in 90 days. If interest is 6.6%, determine whether John should purchase the ticket now or in 90 days.